Callon Petroleum Company Announces Second Quarter 2022 Results
Callon Petroleum Company (CPE) reported a robust performance for Q2 2022, with production averaging 100.7 MBoe/d, comprising 61% oil. Key financial highlights include net cash from operations of $372.3 million, adjusted free cash flow of $125.6 million, and a net income of $348 million ($5.62 per share). The company saw a 20% increase in well productivity in the Delaware Basin and achieved an operating margin of $67.58 per Boe. Despite some elevated downtime due to workover activities, Callon plans to increase its production guidance for the full year to between 102 and 105 MBoe/d.
- Net income of $348 million, or $5.62 per diluted share.
- Adjusted free cash flow of $125.6 million.
- Operating margin increased to $67.58 per Boe, an over 15% sequential increase.
- 20% increase in well productivity in the Delaware Basin compared to 2021.
- Increased downtime due to a higher level of well failures, attributed to power disruptions.
- Elevated lease operating expenses of $72.9 million, or $7.96 per Boe.
HOUSTON, Aug. 3 , 2022 /PRNewswire/ -- Callon Petroleum Company (NYSE: CPE) ("Callon" or the "Company") today reported results of operations for the three and six months ended June 30, 2022.
Presentation slides accompanying this earnings release are available on the Company's website at www.callon.com located on the "Presentations" page within the Investors section of the site.
Second Quarter 2022 and Recent Highlights
- Delivered production of approximately 100.7 MBoe/d (
61% oil and81% liquids) in the second quarter of 2022 - Increased Delaware Basin well productivity in 2022 by approximately
20% over 2021 as co-development offset spacing and completions initiatives are implemented - Generated net cash provided by operating activities of
$372.3 million and adjusted free cash flow of$125.6 million - Reported net income of
$348.0 million , or$5.62 per diluted share, adjusted EBITDA of$418.5 million , and adjusted income of$227.8 million , or$3.68 per diluted share - Achieved an operating margin of
$67.58 per Boe, a sequential increase of over15% - Executed a refinancing transaction that extended maturities and reduced term balances, with total debt balance of
$2.5 billion at June 30 after continued debt reduction
"Callon continues to execute on important steps to solidify a foundation for durable free cash flow generation" said Joe Gatto, President and Chief Executive Officer. "In the inflationary environment that we operate in today, and likely for the foreseeable future, operating margins are critical to our cash generation objectives. In our most recent quarter, our operating margins increased to almost
Callon Operations Update
At June 30, 2022, Callon had 1,377 gross (1,229.3 net) wells producing from established flow units in the Permian and Eagle Ford. Net daily production for the three months ended June 30, 2022 was 100.7 MBoe/d (
Production volumes for the quarter include the impact of the following items:
- Increased Workover Activity – Callon experienced a higher level of well failures than historical trends due to intermittent power disruptions and the timing of useful equipment lives. During these outages, Callon accelerated its artificial lift initiatives, which provide production and runtime benefits, primarily in Delaware Basin South. Given the additional time to complete these conversion and repair projects, which were roughly double the level executed in the first quarter, downtime was elevated in the second quarter. Portions of this activity were previously planned to occur later in the year and, as a result, workovers and associated downtime for this initiative should be reduced going forward relative to our previous forecast.
- Conversion of Midland Basin Gathering Contract – Natural gas and NGL volumes increased from the conversion of a Midland Basin gathering contract from a percentage of proceeds to fee-based which resulted in a reduction in oil cut for the quarter.
Operated drilling and completion activity for the three months ended June 30, 2022 are summarized in the table below:
Three Months Ended June 30, 2022 | ||||||||||||
Drilled | Completed | Placed on Production | ||||||||||
Region | Gross | Net | Gross | Net | Gross | Net | ||||||
Delaware Basin | 11 | 10.9 | 6 | 5.9 | 11 | 10.1 | ||||||
Midland Basin | 16 | 14.3 | 7 | 6.3 | 7 | 6.0 | ||||||
Eagle Ford Shale | 8 | 7.4 | 15 | 13.0 | 15 | 13.0 | ||||||
Total | 35 | 32.6 | 28 | 25.2 | 33 | 29.1 |
For the three months ended June 30, 2022, Callon drilled 35 gross (32.6 net) wells and placed a combined 33 gross (29.1 net) wells on production. Completions operations for the quarter included 6 gross (5.9 net) wells in the Delaware Basin, 7 gross (6.3 net) wells in the Midland Basin, and 15 gross (13.0 net) wells in the Eagle Ford Shale. Callon placed 11 gross (10.1 net) wells on production in the Delaware Basin, 7 gross (6.0 net) wells in the Midland Basin, and 15 gross (13.0 net) wells in the Eagle Ford Shale. The average lateral length for the wells completed during the second quarter was 8,281 feet. Operated completions during the second quarter consisted of 4 Upper Wolfcamp A wells and 2 Lower Wolfcamp A wells in the Delaware Basin; 2 Lower Spraberry wells, 3 Wolfcamp A wells and 2 Wolfcamp B wells in the Midland Basin; and 15 lower Eagle Ford Shale wells.
Leverage and Liquidity Update
On June 9, 2022, Callon priced
Third Quarter Activity Outlook and Guidance
Callon is currently running six rigs, with three rigs in the Delaware Basin, two rigs in the Midland Basin and one rig in the Eagle Ford which the Company will be dropping in the coming days. Callon plans to utilize two to three completion crews for the third quarter, supporting new production across the Midland, Delaware and Eagle Ford positions.
For the third quarter, the Company expects to produce between 102 and 105 MBoe/d (
For full year 2022, Callon is increasing the bottom end of its production guidance to between 102 and 105 MBoe/d (
Capital Expenditures
For the three months ended June 30, 2022, Callon incurred
Three Months Ended June 30, 2022 | ||||||||
Operational | Capitalized | Capitalized | Total Capital | |||||
Capital (a) | Interest | G&A | Expenditures | |||||
(In thousands) | ||||||||
Cash basis (b) | ||||||||
Timing adjustments (c) | 65,110 | 4,459 | — | 69,569 | ||||
Non-cash items | (8,369) | 1,887 | (147) | (6,629) | ||||
Accrual basis |
(a) | Includes drilling, completions, facilities and equipment, but excludes land, seismic and asset retirement costs. |
(b) | Cash basis is presented here to help users of financial information reconcile amounts from the cash flow statement to the balance sheet by accounting for timing related changes in working capital that align with our development pace and rig count. |
(c) | Includes timing adjustments related to cash disbursements in the current period for capital expenditures incurred in the prior period. |
Hedge Portfolio Summary
As of July 29, 2022, Callon had the following outstanding oil and natural gas derivative contracts:
For the Remainder | For the Full Year | For the Full Year | |||
Oil Contracts (WTI) | 2022 | 2023 | 2024 | ||
Swap Contracts | |||||
Total volume (Bbls) | 3,634,000 | 1,538,500 | — | ||
Weighted average price per Bbl | $— | ||||
Collar Contracts with Short Puts (Three-Way Collars) | |||||
Total volume (Bbls) | — | 1,825,000 | — | ||
Weighted average price per Bbl | |||||
Ceiling (short call) | $— | $— | |||
Floor (long put) | $— | $— | |||
Floor (short put) | $— | $— | |||
Collar Contracts | |||||
Total volume (Bbls) | 2,392,000 | 2,730,000 | — | ||
Weighted average price per Bbl | |||||
Ceiling (short call) | $— | ||||
Floor (long put) | $— | ||||
Short Call Swaption Contracts (a) | |||||
Total volume (Bbls) | — | — | 1,830,000 | ||
Weighted average price per Bbl | $— | $— | |||
Oil Contracts (Midland Basis Differential) | |||||
Swap Contracts | |||||
Total volume (Bbls) | 1,196,000 | — | — | ||
Weighted average price per Bbl | $— | $— |
(a) The 2024 short call swaption contracts have exercise expiration dates of December 29, 2023. |
For the Remainder | For the Full Year | ||
Natural Gas Contracts (Henry Hub) | 2022 | 2023 | |
Swap Contracts | |||
Total volume (MMBtu) | 6,150,000 | — | |
Weighted average price per MMBtu | $— | ||
Collar Contracts | |||
Total volume (MMBtu) | 5,510,000 | 6,640,000 | |
Weighted average price per MMBtu | |||
Ceiling (short call) | |||
Floor (long put) | |||
Natural Gas Contracts (Waha Basis Differential) | |||
Swap Contracts | |||
Total volume (MMBtu) | 1,220,000 | 6,080,000 | |
Weighted average price per MMBtu | ( | ( |
Operating and Financial Results
The following table presents summary information for the periods indicated:
Three Months Ended | ||||||
June 30, 2022 | March 31, 2022 | June 30, 2021 | ||||
Total production | ||||||
Oil (MBbls) | ||||||
Permian | 4,290 | 4,469 | 3,232 | |||
Eagle Ford | 1,299 | 1,377 | 1,870 | |||
Total oil | 5,589 | 5,846 | 5,102 | |||
Natural gas (MMcf) | ||||||
Permian | 8,875 | 8,590 | 7,138 | |||
Eagle Ford | 1,437 | 1,525 | 1,745 | |||
Total natural gas | 10,312 | 10,115 | 8,883 | |||
NGLs (MBbls) | ||||||
Permian | 1,622 | 1,455 | 1,216 | |||
Eagle Ford | 232 | 252 | 299 | |||
Total NGLs | 1,854 | 1,707 | 1,515 | |||
Total production (MBoe) | ||||||
Permian | 7,391 | 7,356 | 5,637 | |||
Eagle Ford | 1,771 | 1,883 | 2,460 | |||
Total barrels of oil equivalent | 9,162 | 9,239 | 8,097 | |||
Total daily production (Boe/d) | ||||||
Permian | 81,216 | 81,733 | 61,948 | |||
Eagle Ford | 19,469 | 20,922 | 27,033 | |||
Total barrels of oil equivalent | 100,685 | 102,655 | 88,981 | |||
Oil as % of total daily production | 61 % | 63 % | 63 % | |||
Average realized sales price (excluding impact of settled derivatives) | ||||||
Oil (per Bbl) | ||||||
Permian | ||||||
Eagle Ford | 111.53 | 95.02 | 65.83 | |||
Total oil | ||||||
Natural gas (per Mcf) | ||||||
Permian | ||||||
Eagle Ford | 7.27 | 5.18 | 2.82 | |||
Total natural gas | ||||||
NGLs (per Bbl) | ||||||
Permian | ||||||
Eagle Ford | 38.53 | 35.93 | 22.00 | |||
Total NGLs | ||||||
Average realized sales price (per Boe) | ||||||
Permian | ||||||
Eagle Ford | 92.75 | 78.50 | 54.72 | |||
Total average realized sales price | ||||||
Average realized sales price (including impact of settled derivatives) | ||||||
Oil (per Bbl) | ||||||
Natural gas (per Mcf) | 3.91 | 3.59 | 2.25 | |||
NGLs (per Bbl) | 40.74 | 37.34 | 23.21 | |||
Total average realized sales price (per Boe) | ||||||
Three Months Ended | ||||||
June 30, 2022 | March 31, 2022 | June 30, 2021 | ||||
Revenues (in thousands) (a) | ||||||
Oil | ||||||
Permian | ||||||
Eagle Ford | 144,876 | 130,845 | 123,102 | |||
Total oil | ||||||
Natural gas | ||||||
Permian | ||||||
Eagle Ford | 10,444 | 7,907 | 4,928 | |||
Total natural gas | ||||||
NGLs | ||||||
Permian | ||||||
Eagle Ford | 8,938 | 9,055 | 6,578 | |||
Total NGLs | ||||||
Total revenues | ||||||
Permian | ||||||
Eagle Ford | 164,258 | 147,807 | 134,608 | |||
Total revenues | ||||||
Additional per Boe data | ||||||
Sales price (b) | ||||||
Permian | ||||||
Eagle Ford | 92.75 | 78.50 | 54.72 | |||
Total sales price | ||||||
Lease operating expense | ||||||
Permian | ||||||
Eagle Ford | 10.59 | 8.99 | 8.34 | |||
Total lease operating expense | ||||||
Production and ad valorem taxes | ||||||
Permian | ||||||
Eagle Ford | 5.89 | 4.82 | 3.12 | |||
Total production and ad valorem taxes | ||||||
Gathering, transportation and processing | ||||||
Permian | ||||||
Eagle Ford | 1.93 | 1.92 | 1.84 | |||
Total gathering, transportation and processing | ||||||
Operating margin | ||||||
Permian | ||||||
Eagle Ford | 74.34 | 62.77 | 41.42 | |||
Total operating margin | ||||||
Depreciation, depletion and amortization | ||||||
General and administrative | ||||||
Adjusted G&A | ||||||
Cash component (c) | ||||||
Non-cash component |
(a) Excludes sales of oil and gas purchased from third parties. |
(b) Excludes the impact of settled derivatives. |
(c) Excludes the change in fair value and amortization of share-based incentive awards. |
Revenue. For the quarter ended June 30, 2022, Callon reported revenue of
Commodity Derivatives. For the quarter ended June 30, 2022, the net loss on commodity derivative contracts includes the following (in thousands):
Three Months Ended June 30, 2022 | |
Loss on oil derivatives | |
Loss on natural gas derivatives | 5,738 |
Loss on NGL derivatives | — |
Loss on commodity derivative contracts |
For the quarter ended June 30, 2022, the cash paid for commodity derivative settlements includes the following (in thousands):
Three Months Ended June 30, 2022 | |
Cash paid on oil derivatives, net | ( |
Cash paid on natural gas derivatives, net | (21,808) |
Cash paid on NGL derivatives, net | (2,255) |
Cash paid for commodity derivative settlements, net | ( |
Lease Operating Expenses, including workover ("LOE"). LOE for the three months ended June 30, 2022 was
Production and Ad Valorem Taxes. Production and ad valorem taxes for the three months ended June 30, 2022 were approximately
Gathering, Transportation and Processing. Gathering, transportation and processing expense for the three months ended June 30, 2022 was
Depreciation, Depletion and Amortization ("DD&A"). DD&A for the three months ended June 30, 2022 was
General and Administrative Expense ("G&A"). G&A for the three months ended June 30, 2022 and March 31, 2022 was
The following table reconciles total G&A to Adjusted G&A - cash component and full cash G&A (in thousands):
Three Months Ended | |||||
June 30, 2022 | March 31, 2022 | June 30, 2021 | |||
Total G&A | |||||
Change in the fair value of liability share-based awards (non-cash) | 5,071 | (2,851) | (3,555) | ||
Adjusted G&A – total | 15,980 | 14,270 | 7,510 | ||
Equity-settled, share-based compensation (non-cash) | (1,861) | (1,315) | (1,724) | ||
Adjusted G&A – cash component | |||||
Capitalized cash G&A | 11,432 | 9,703 | 7,404 | ||
Full cash G&A |
Income Tax. Callon provides for income taxes at the statutory rate of
Adjusted Income, Adjusted EBITDA and Unhedged Adjusted EBITDA. The following tables reconcile the Company's net income (loss) to adjusted income, adjusted EBITDA and unhedged adjusted EBITDA:
Three Months Ended | |||||
June 30, 2022 | March 31, 2022 | June 30, 2021 | |||
(In thousands, except per share data) | |||||
Net income (loss) | ( | ||||
Loss on derivative contracts | 81,648 | 358,300 | 190,463 | ||
Loss on commodity derivative settlements, net | (184,558) | (133,476) | (100,128) | ||
Non-cash (benefit) expense related to share-based awards | (3,210) | 4,166 | 5,279 | ||
Merger, integration, transaction and other | 1,051 | (13) | 5,584 | ||
Loss on extinguishment of debt | 42,417 | — | — | ||
Tax effect on adjustments above (a) | 13,157 | (48,085) | (21,252) | ||
Change in valuation allowance | (70,704) | (7,963) | 2,079 | ||
Adjusted income | |||||
Net income (loss) per diluted share | ( | ||||
Adjusted income per diluted share | |||||
Basic weighted average common shares outstanding | 61,679 | 61,487 | 46,267 | ||
Diluted weighted average common shares outstanding (GAAP) | 61,909 | 62,065 | 46,267 | ||
Effect of potentially dilutive instruments | — | — | 862 | ||
Adjusted diluted weighted average common shares outstanding | 61,909 | 62,065 | 47,129 |
(a) Calculated using the federal statutory rate of |
Three Months Ended | |||||
June 30, 2022 | March 31, 2022 | June 30, 2021 | |||
(In thousands) | |||||
Net income (loss) | ( | ||||
Loss on derivative contracts | 81,648 | 358,300 | 190,463 | ||
Loss on commodity derivative settlements, net | (184,558) | (133,476) | (100,128) | ||
Non-cash (benefit) expense related to share-based awards | (3,210) | 4,166 | 5,279 | ||
Merger, integration, transaction and other | 1,051 | (13) | 5,584 | ||
Income tax (benefit) expense | 3,009 | 484 | (478) | ||
Interest expense, net | 20,691 | 21,558 | 24,634 | ||
Depreciation, depletion and amortization | 109,409 | 102,979 | 83,128 | ||
Loss on extinguishment of debt | 42,417 | — | — | ||
Adjusted EBITDA | |||||
Add: Loss on commodity derivative settlements, net | 184,558 | 133,476 | 100,128 | ||
Unhedged adjusted EBITDA |
Adjusted Free Cash Flow. The following table reconciles the Company's net cash provided by operating activities to unhedged adjusted EBITDA, adjusted EBITDA and adjusted free cash flow:
Three Months Ended | |||||
June 30, 2022 | March 31, 2022 | June 30, 2021 | |||
(In thousands) | |||||
Net cash provided by operating activities | |||||
Changes in working capital and other | 25,096 | 123,805 | 13,520 | ||
Changes in accrued hedge settlements | 1,839 | (31,951) | (14,719) | ||
Loss on commodity derivative settlements, net | 184,558 | 133,476 | 100,128 | ||
Cash interest expense, net | 19,206 | 19,842 | 22,383 | ||
Merger, integration and transaction | — | 769 | — | ||
Unhedged adjusted EBITDA | |||||
Less: Loss on commodity derivative settlements, net | 184,558 | 133,476 | 100,128 | ||
Adjusted EBITDA | |||||
Less: Operational capital expenditures (accrual) | 237,812 | 157,378 | 138,321 | ||
Less: Capitalized cash interest | 24,416 | 23,506 | 21,740 | ||
Less: Cash interest expense, net | 19,206 | 19,842 | 22,383 | ||
Less: Capitalized cash G&A | 11,432 | 9,703 | 7,404 | ||
Adjusted free cash flow |
Adjusted Discretionary Cash Flow. The following table reconciles the Company's net cash provided by operating activities to adjusted discretionary cash flow:
Three Months Ended | |||||
June 30, 2022 | March 31, 2022 | June 30, 2021 | |||
(In thousands) | |||||
Net cash provided by operating activities | |||||
Changes in working capital | 23,342 | 126,997 | 11,709 | ||
Merger, integration and transaction | — | 769 | — | ||
Adjusted discretionary cash flow |
Adjusted Total Revenue. Adjusted total revenue is reconciled to total operating revenues, which excludes revenue from sales of commodities purchased from a third party, in the following table:
Three Months Ended | |||||
June 30, 2022 | March 31, 2022 | June 30, 2021 | |||
(In thousands) | |||||
Operating revenues | |||||
Oil | |||||
Natural gas | 64,913 | 43,976 | 24,080 | ||
NGLs | 75,530 | 67,618 | 36,625 | ||
Total operating revenues | |||||
Impact of settled derivatives | (184,558) | (133,476) | (100,128) | ||
Adjusted total revenue |
Net Debt. The following table reconciles the Company's total debt to net debt:
June 30, 2022 | March 31, | December 31, 2021 | September 30, 2021 | June 30, 2021 | |||||
(In thousands) | |||||||||
Total debt | |||||||||
Unamortized premiums, discount, and deferred loan costs, net | 20,684 | 26,639 | 28,806 | 48,311 | 37,487 | ||||
Adjusted total debt | |||||||||
Less: Cash and cash equivalents | 6,100 | 4,150 | 9,882 | 3,699 | 3,800 | ||||
Net debt |
Callon Petroleum Company Consolidated Balance Sheets (In thousands, except par and share amounts) (Unaudited)
| ||||
June 30, 2022 | December 31, 2021 | |||
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | ||||
Accounts receivable, net | 360,955 | 232,436 | ||
Fair value of derivatives | — | 22,381 | ||
Other current assets | 37,960 | 30,745 | ||
Total current assets | 405,015 | 295,444 | ||
Oil and natural gas properties, full cost accounting method: | ||||
Evaluated properties, net | 3,573,282 | 3,352,821 | ||
Unevaluated properties | 1,876,531 | 1,812,827 | ||
Total oil and natural gas properties, net | 5,449,813 | 5,165,648 | ||
Other property and equipment, net | 26,332 | 28,128 | ||
Deferred financing costs | 14,961 | 18,125 | ||
Other assets, net | 52,209 | 40,158 | ||
Total assets | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
Current liabilities: | ||||
Accounts payable and accrued liabilities | ||||
Fair value of derivatives | 301,362 | 185,977 | ||
Other current liabilities | 134,581 | 116,523 | ||
Total current liabilities | 1,042,036 | 872,491 | ||
Long-term debt | 2,516,337 | 2,694,115 | ||
Asset retirement obligations | 57,427 | 54,458 | ||
Fair value of derivatives | 21,251 | 11,409 | ||
Other long-term liabilities | 51,942 | 49,262 | ||
Total liabilities | 3,688,993 | 3,681,735 | ||
Commitments and contingencies | ||||
Stockholders' equity: | ||||
Common stock, | 617 | 614 | ||
Capital in excess of par value | 4,018,178 | 4,012,358 | ||
Accumulated deficit | (1,759,458) | (2,147,204) | ||
Total stockholders' equity | 2,259,337 | 1,865,768 | ||
Total liabilities and stockholders' equity |
Callon Petroleum Company Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)
| |||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Operating Revenues: | |||||||
Oil | |||||||
Natural gas | 64,913 | 24,080 | 108,889 | 48,300 | |||
Natural gas liquids | 75,530 | 36,625 | 143,148 | 65,982 | |||
Sales of purchased oil and gas | 153,365 | 46,252 | 265,740 | 85,511 | |||
Total operating revenues | 913,620 | 440,399 | 1,690,838 | 800,280 | |||
Operating Expenses: | |||||||
Lease operating | 72,940 | 46,460 | 140,268 | 86,913 | |||
Production and ad valorem taxes | 44,873 | 21,958 | 82,551 | 40,397 | |||
Gathering, transportation and processing | 23,267 | 20,031 | 44,042 | 38,012 | |||
Cost of purchased oil and gas | 155,397 | 49,249 | 266,668 | 90,166 | |||
Depreciation, depletion and amortization | 109,409 | 83,128 | 212,388 | 154,115 | |||
General and administrative | 10,909 | 11,065 | 28,030 | 27,864 | |||
Merger, integration and transaction | — | — | 769 | — | |||
Total operating expenses | 416,795 | 231,891 | 774,716 | 437,467 | |||
Income From Operations | 496,825 | 208,508 | 916,122 | 362,813 | |||
Other (Income) Expenses: | |||||||
Interest expense, net of capitalized amounts | 20,691 | 24,634 | 42,249 | 49,050 | |||
Loss on derivative contracts | 81,648 | 190,463 | 439,948 | 404,986 | |||
Loss on extinguishment of debt | 42,417 | — | 42,417 | — | |||
Other (income) expense | 1,051 | 5,584 | 269 | 2,278 | |||
Total other expense | 145,807 | 220,681 | 524,883 | 456,314 | |||
Income (Loss) Before Income Taxes | 351,018 | (12,173) | 391,239 | (93,501) | |||
Income tax benefit (expense) | (3,009) | 478 | (3,493) | 1,399 | |||
Net Income (Loss) | ( | ( | |||||
Net Income (Loss) Per Common Share: | |||||||
Basic | ( | ( | |||||
Diluted | ( | ( | |||||
Weighted Average Common Shares Outstanding: | |||||||
Basic | 61,679 | 46,267 | 61,583 | 44,439 | |||
Diluted | 61,909 | 46,267 | 61,956 | 44,439 |
Callon Petroleum Company Consolidated Statements of Cash Flows (In thousands) (Unaudited)
| |||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Cash flows from operating activities: | |||||||
Net income (loss) | ( | ( | |||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation, depletion and amortization | 109,409 | 83,128 | 212,388 | 154,115 | |||
Amortization of non-cash debt related items, net | 1,485 | 2,252 | 3,201 | 4,508 | |||
Loss on derivative contracts | 81,648 | 190,463 | 439,948 | 404,986 | |||
Cash paid for commodity derivative settlements, net | (186,397) | (85,409) | (287,922) | (127,571) | |||
Loss on extinguishment of debt | 42,417 | — | 42,417 | — | |||
Non-cash (benefit) expense related to share-based awards | (3,210) | 5,279 | 956 | 12,887 | |||
Other, net | 2,306 | 3,294 | 5,200 | 4,511 | |||
Changes in current assets and liabilities: | |||||||
Accounts receivable | (14,072) | (21,674) | (130,394) | (67,357) | |||
Other current assets | (3,317) | (4,567) | (7,497) | (7,423) | |||
Accounts payable and accrued liabilities | (5,953) | 14,532 | (18,940) | 26,714 | |||
Cash received for settlements of contingent consideration arrangements, net | — | — | 6,492 | — | |||
Net cash provided by operating activities | 372,325 | 175,603 | 653,595 | 313,268 | |||
Cash flows from investing activities: | |||||||
Capital expenditures | (212,461) | (149,662) | (413,939) | (251,003) | |||
Acquisition of oil and gas properties | (6,536) | (1,447) | (15,945) | (2,215) | |||
Proceeds from sales of assets | 106 | 31,611 | 4,590 | 31,611 | |||
Cash paid for settlement of contingent consideration arrangement | — | — | (19,171) | — | |||
Other, net | 5,074 | 625 | 8,709 | 4,220 | |||
Net cash used in investing activities | (213,817) | (118,873) | (435,756) | (217,387) | |||
Cash flows from financing activities: | |||||||
Borrowings on Credit Facility | 1,051,000 | 433,500 | 1,724,000 | 736,500 | |||
Payments on Credit Facility | (984,000) | (508,500) | (1,730,000) | (846,500) | |||
Issuance of | 600,000 | — | 600,000 | — | |||
Redemption of | (467,287) | — | (467,287) | — | |||
Redemption of | (339,507) | — | (339,507) | — | |||
Cash received for settlement of contingent consideration arrangement | — | — | 8,512 | — | |||
Payment of deferred financing costs | (10,542) | — | (10,542) | — | |||
Other, net | (6,222) | (2,280) | (6,797) | (2,317) | |||
Net cash used in financing activities | (156,558) | (77,280) | (221,621) | (112,317) | |||
Net change in cash and cash equivalents | 1,950 | (20,550) | (3,782) | (16,436) | |||
Balance, beginning of period | 4,150 | 24,350 | 9,882 | 20,236 | |||
Balance, end of period |
Non-GAAP Financial Measures
This news release refers to non-GAAP financial measures such as "adjusted free cash flow," "adjusted EBITDA," "unhedged adjusted EBITDA," "operating margin," "adjusted income," "adjusted income per diluted share," "adjusted diluted weighted average common shares outstanding," "adjusted discretionary cash flow," "adjusted total revenue," "adjusted G&A," "full cash G&A," and "net debt." These measures, detailed below, are provided in addition to, and not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with GAAP (including the notes), included in our filings with the U.S. Securities and Exchange Commission (the "SEC") and posted on our website.
- Adjusted free cash flow is a supplemental non-GAAP measure that is defined by the Company as adjusted EBITDA less operational capital expenditures (accrual), capitalized cash interest, capitalized cash G&A (which excludes capitalized expense related to share-based awards), and cash interest expense, net. We believe adjusted free cash flow provides useful information to investors because it is a comparable metric against other companies in the industry and is a widely accepted financial indicator of an oil and natural gas company's ability to generate cash for the use of internally funding their capital development program and to service or incur debt. Adjusted free cash flow is not a measure of a company's financial performance under GAAP and should not be considered as an alternative to net cash provided by operating activities, or as a measure of liquidity, or as an alternative to net income (loss).
- Callon calculates adjusted EBITDA as net income (loss) before interest expense, income tax expense (benefit), depreciation, depletion and amortization, (gains) losses on derivative instruments excluding net settled derivative instruments, impairment of evaluated oil and gas properties, non-cash share-based compensation expense, merger, integration and transaction expense, (gain) loss on extinguishment of debt, and certain other expenses. Adjusted EBITDA is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income (loss), operating income (loss), cash flow provided by operating activities or other income or cash flow data prepared in accordance with GAAP. However, the Company believes that adjusted EBITDA provides useful information to investors because it provides additional information with respect to our performance or ability to meet our future debt service, capital expenditures and working capital requirements. Because adjusted EBITDA excludes some, but not all, items that affect net income (loss) and may vary among companies, the adjusted EBITDA presented above may not be comparable to similarly titled measures of other companies.
- Callon calculates unhedged adjusted EBITDA as adjusted EBITDA, as defined above, excluding the impact of net settled derivative instruments. Unhedged adjusted EBITDA is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income (loss), operating income (loss), cash flow provided by operating activities or other income or cash flow data prepared in accordance with GAAP. However, the Company believes that unhedged adjusted EBITDA provides useful information to investors because it provides additional information with respect to our performance without the impact of our settled derivative instruments. Because unhedged adjusted EBITDA excludes some, but not all, items that affect net income (loss) and may vary among companies, the unhedged adjusted EBITDA presented above may not be comparable to similarly titled measures of other companies.
- Callon believes that operating margin is a comparable metric against other companies in the industry and is useful to investors because it is an indicator of an oil and natural gas company's operating profitability per unit of production. Operating margin is a supplemental non-GAAP measure that is defined by the Company as oil, natural gas, and NGL revenues sales price less lease operating expense; production and ad valorem taxes; and gathering, transportation and processing fees divided by total production for the period.
- Adjusted income and adjusted income per diluted share are supplemental non-GAAP measures that Callon believes are useful to investors because they provide readers with a meaningful measure of our profitability before recording certain items whose timing or amount cannot be reasonably determined. These measures exclude the net of tax effects of these items and non-cash valuation adjustments, which are detailed in the reconciliation provided. Adjusted income and adjusted income per diluted share are not measures of financial performance under GAAP. Accordingly, neither should be considered as a substitute for net income (loss), operating income (loss), or other income data prepared in accordance with GAAP. However, the Company believes that adjusted income and adjusted income per diluted share provide additional information with respect to our performance. Because adjusted income and adjusted income per diluted share exclude some, but not all, items that affect net income (loss) and may vary among companies, the adjusted income and adjusted income per diluted share presented above may not be comparable to similarly titled measures of other companies.
- Adjusted diluted weighted average common shares outstanding is a non-GAAP financial measure which includes the effect of potentially dilutive instruments that, under certain circumstances described below, are excluded from diluted weighted average common shares outstanding, the most directly comparable GAAP financial measure. When a net loss exists, all potentially dilutive instruments are anti-dilutive to the net loss per common share and therefore excluded from the computation of diluted weighted average common shares outstanding. The effect of potentially dilutive instruments are included in the computation of adjusted diluted weighted average common shares outstanding for purposes of computing adjusted income per diluted share.
- Adjusted discretionary cash flow is a supplemental non-GAAP measure that Callon believes provides useful information to investors because it is a comparable metric against other companies in the industry and is a widely accepted financial indicator of an oil and natural gas company's ability to generate cash for the use of internally funding their capital development program and to service or incur debt. Adjusted discretionary cash flow is defined by Callon as net cash provided by operating activities before changes in working capital and merger, integration and transaction expenses. Callon has included this information because changes in operating assets and liabilities relate to the timing of cash receipts and disbursements, which the Company may not control, and the cash flow effect may not be reflected the period in which the operating activities occurred. Adjusted discretionary cash flow is not a measure of a company's financial performance under GAAP and should not be considered as an alternative to net cash provided by operating activities, or as a measure of liquidity, or as an alternative to net income (loss).
- Callon believes that the non-GAAP measure of adjusted total revenue (which is revenue including the gain or loss from the settlement of derivative contracts) is useful to investors because it provides readers with a revenue value more comparable to other companies who engage in price risk management activities through the use of commodity derivative instruments and reflects the results of derivative settlements with expected cash flow impacts within total revenues.
- Adjusted G&A is a supplemental non-GAAP financial measure that excludes non-cash incentive share-based compensation valuation adjustments and adjusted G&A - cash component further excludes equity-settled, share-based compensation expenses. Callon believes that the non-GAAP measure of adjusted G&A and adjusted G&A - cash component are useful to investors because they provide for greater comparability period-over-period. In addition, adjusted G&A - cash component provides a meaningful measure of our recurring G&A expense.
- Full cash G&A is a supplemental non-GAAP financial measure that Callon defines as adjusted G&A – cash component plus capitalized G&A excluding capitalized expense related to share-based awards. Callon believes that the non-GAAP measure of full cash G&A is useful to investors because it provides a meaningful measure of our total recurring cash G&A costs, whether expensed or capitalized, and provides for greater comparability on a period-over-period basis.
- Net debt is a supplemental non-GAAP measure that is defined by the Company as total debt excluding unamortized premiums, discount, and deferred loan costs, less cash and cash equivalents. Net debt should not be considered an alternative to, or more meaningful than, total debt, the most directly comparable GAAP measure. Management uses net debt to determine the Company's outstanding debt obligations that would not be readily satisfied by its cash and cash equivalents on hand. We believe this metric is useful to analysts and investors in determining the Company's leverage position since the Company has the ability to, and may decide to, use a portion of its cash and cash equivalents to reduce debt. This metric is sometimes presented as a ratio with Adjusted EBITDA in order to provide investors with another means of evaluating the Company's ability to service its existing debt obligations as well as any future increase in the amount of such obligations. This ratio is referred to by the Company as its leverage ratio.
Earnings Call Information
The Company will host a conference call on Thursday, August 4, 2022, to discuss second quarter 2022 financial and operating results, outlook and guidance for the remainder of 2022, and current corporate strategy and initiatives.
Please join Callon Petroleum Company via the Internet for a webcast of the conference call:
Date/Time: Thursday, August 4, 2022, at 8:00 a.m. Central Time (9:00 a.m. Eastern Time)
Webcast: Select "News and Events" under the "Investors" section of the Company's website: www.callon.com.
An archive of the conference call webcast will also be available at www.callon.com under the "Investors" section of the website.
About Callon Petroleum Company
Callon Petroleum Company is an independent oil and natural gas company focused on the acquisition, exploration and development of high-quality assets in the leading oil plays of South and West Texas.
Cautionary Statement Regarding Forward-Looking Information
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include all statements regarding wells anticipated to be drilled and placed on production; future levels of development activity and associated production, capital expenditures and cash flow expectations; the Company's production and expenditure guidance; estimated reserve quantities and the present value thereof; future debt levels and leverage; and the implementation of the Company's business plans and strategy, as well as statements including the words "believe," "expect," "plans," "may," "will," "should," "could," and words of similar meaning. These statements reflect the Company's current views with respect to future events and financial performance based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. No assurances can be given, however, that these events will occur or that these projections will be achieved, and actual results could differ materially from those projected as a result of certain factors. Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law. Some of the factors which could affect our future results and could cause results to differ materially from those expressed in our forward-looking statements include the volatility of oil and natural gas prices; changes in the supply of and demand for oil and natural gas, including as a result of the COVID-19 pandemic and various governmental actions taken to mitigate its impact or actions by, or disputes among members of OPEC and other oil and natural gas producing countries with respect to production levels or other matters related to the price of oil; our ability to drill and complete wells; operational, regulatory and environment risks; the cost and availability of equipment and labor; our ability to finance our development activities at expected costs or at expected times or at all; our inability to realize the benefits of recent transactions; currently unknown risks and liabilities relating to the newly acquired assets and operations; adverse actions by third parties involved with the transactions; risks that are not yet known or material to us; and other risks more fully discussed in our filings with the SEC, including our most recent Annual Reports on Form 10-K and subsequent Quarterly Reports on Form 10-Q, available on our website or the SEC's website at www.sec.gov. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
Contact Information
Kevin Smith
Director of Investor Relations
Callon Petroleum Company
ir@callon.com
(281) 589-5200
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SOURCE Callon Petroleum Company
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